txrhTexas Roadhouse Inc (NASDAQ:TXRH) announced financial results for the 13 and 39 week periods ended September 27, 2016.

Results for the third quarter included the following highlights:

  • Comparable restaurant sales growth of 3.4% at company restaurants and 3.3% at domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant sales, increased 155 basis points to 18.1%, primarily driven by lower food costs, partially offset by higher labor costs;
  • Diluted earnings per share increased 24.9% to $0.36 from $0.29 in the prior year;
  • The Company recorded a pre-tax charge of $1.2 million ($0.8 million after-tax) related to a legal settlement; and
  • Seven company-owned restaurants were opened, including two Bubba’s 33 restaurants.

Results for year-to-date included the following highlights:

  • Comparable restaurant sales growth of 4.2% at company restaurants and 3.9% at domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant sales, increased 192 basis points to 19.2%;
  • Diluted earnings per share increased 27.9% to $1.34 from $1.05 in the prior year;
  • The Company recorded a pre-tax charge of $6.7 million ($4.1 million after-tax) related to a legal settlement which had a $0.06impact on diluted earnings per share and a 5.6% impact on diluted earnings per share growth;
  • 21 company-owned restaurants were opened, including five Bubba’s 33 restaurants; and
  • The Company repurchased 114,700 shares of its common stock for $4.1 million.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, “We are pleased to report another quarter of restaurant margin expansion and double-digit diluted earnings per share growth. Our results were driven by the opening of new restaurants, positive comparable restaurant sales and continued commodity deflation. As we move into the fourth quarter, our sales momentum continues with October comparable restaurant sales up 3.8%, including positive traffic growth.”

Taylor continued, “Looking ahead to 2017, we will stay focused on protecting our long-term brand position by enhancing our ongoing commitment to our value proposition with consumers and to legendary food and legendary service. This commitment has served us well with 26 consecutive quarters of positive traffic growth. In addition, our strong balance sheet and healthy cash flow allow us to continue to internally fund our growth, while returning excess capital to our shareholders through dividend payments and ongoing share repurchases.”

2016 Outlook

The Company reported that comparable restaurant sales at company restaurants for the first four weeks of its fourth quarter of fiscal 2016 increased approximately 3.8% compared to the prior year period.

Management updated the following expectations for 2016:

  • Approximately 30 company restaurant openings, including as many as nine Bubba’s 33 restaurants; and,
  • Food cost deflation of approximately 3.5% compared to previous guidance of 2.5% to 3.0%.

Management reiterated the following expectations for 2016:

  • Positive comparable restaurant sales growth;
  • An income tax rate of approximately 30.0%; and
  • Total capital expenditures of $165.0 million to $175.0 million.

2017 Outlook

Management provided the following initial expectations for 2017:

  • Positive comparable restaurant sales growth;
  • Approximately 30 company restaurant openings, including at approximately seven to eight Bubba’s restaurants;
  • Low-single digit food cost deflation;
  • Mid-single digit labor inflation, including increases from wage rates, as well as regulatory changes;
  • An income tax rate of 30.0% to 31.0%; and
  • Total capital expenditures of $170.0 million. (Original Source)

Shares of Texas Roadhouse closed today at $40.46, down $0.06 or -0.15%. TXRH has a 1-year high of $49.00 and a 1-year low of $33.06. The stock’s 50-day moving average is $40.36 and its 200-day moving average is $43.71.

On the ratings front, TXRH has been the subject of a number of recent research reports. In a report issued on October 20, Buckingham Research analyst John Zolidis maintained a Hold rating on TXRH, with a price target of $43, which implies an upside of 6% from current levels. Separately, on October 18, Maxim’s Stephen Anderson upgraded the stock to Buy and has a price target of $48.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, John Zolidis and Stephen Anderson have a yearly average return of 3.5% and 10.4% respectively. Zolidis has a success rate of 40% and is ranked #1554 out of 4178 analysts, while Anderson has a success rate of 68% and is ranked #154.

The street is mostly Neutral on TXRH stock. Out of 13 analysts who cover the stock, 9 suggest a Hold rating , 2 suggest a Sell and 2 recommend to Buy the stock. The 12-month average price target assigned to the stock is $42.71, which represents a potential upside of 6% from where the stock is currently trading.

Texas Roadhouse, Inc. is a full-service, casual dining restaurant chain, which offers assorted seasoned and aged steaks hand-cut daily on the premises and cooked to order over open gas-fired grills. It operates restaurants under the Texas Roadhouse and Aspen Creek names. The company also offers its guests a selection of ribs, fish, seafood, chicken, pork chops, pulled pork and vegetable plates, an assortment of hamburgers, salads and sandwiches. It also provides supervisory and administrative services for other license and franchise restaurants.